It has been a difficult start to the day for St Barbara Ltd (ASX: SBM) shares.

In morning trade, the ASX gold share is down a sizeable 22% to 36 cents.

Why is this ASX gold share being sold off?

This gold miner's shares are falling heavily on Tuesday after it announced the completion of the institutional component of a capital raising.

According to the release, the ASX gold share has completed a $100 million fully underwritten two-tranche placement of approximately 263 million new shares to institutional and sophisticated investors.

St Barbara is raising these funds at a price of 38 cents per new share, which represents a 17.4% discount to where it last traded.

But it won't be stopping there. The gold miner will also offer eligible retail shareholders the opportunity to participate in a share purchase plan (SPP) at the same issue price to raise a further $10 million before costs.

Why is raising funds?

The release notes that the funds raised will be applied to key areas to advance the Simberi Sulphide Expansion Project. This is with a view of accelerating first production from Simberi Sulphides by up to five months.

These key project components include the procurement and construction of the new larger ball mill circuit, construction of the expanded wharf for concentrate vessels, and construction of the new run-of-mine (ROM) pad and sizer installation.

In respect to the ball mill expansion, it includes work on the mill, foundations, new cyclones and allowance for the additional power generation required by it. The capital cost estimate to complete the ball mill is $58 million including contingency.

Whereas the upgraded wharf, which will accommodate larger ships for loading of the gold concentrates, comes at a cost of $33 million, and the ROM pad and sizer installation will cost $23 million.

But management believes it will be worth the investment. The ASX gold share's CEO, managing director and CEO, Andrew Strelein, was very pleased with the success of the capital raising. He said:

We are extremely pleased with the support for the Placement from our existing institutional shareholders and welcome a number of new domestic and international institutional investors.

The work we've been doing on the Simberi Sulphides Expansion Project continues to highlight a very attractive project opportunity and it makes sense to move quickly, especially in the current gold price environment. Raising these funds now allows the project team to advance development, which is anticipated to accelerate first production from Simberi Sulphide by up to five months.